Refinancing can save you thousands, especially if you have several years left
on your mortgage. However, you can also choose to refinance simply to tap into
your home's equity or reduce your monthly payments.
"How much will it cost?" is a common question for homeowners considering
refinancing their mortgage. While costs vary between lenders and loan amounts,
the following will give you some guidelines to help you compare financing
companies and their offers.
New Home Loan Fees
When you refinance, you are getting a new loan and paying for all those fees
again. Fees, including application fee, appraisal fee, survey costs, attorney
review fee, title search, and home inspection, will usually add up to around
$1000 and $2000. That is in addition to the loan origination fee, usually 1%,
and any additional points.
Some lenders offer zero point loans and low refinancing costs but with higher
interest rates. These types of financing packages make sense if you are
concerned about initial costs and are willing to spend more over the course of
your loan.
Loan Points
Each point equals 1% of the loan, which is due at the loan's signing. So a
point on a $100,000 loan would be $1,000. Besides the loan's origination fee of
1% or more, you can also purchase lower interest rates with points. If you plan
to stay in your home for over seven years, then you can probably save money with
lower interest payments.
Locate Lower Costs
You can also sometimes locate a lower cost for your mortgage by comparing
companies. The easiest way to do this is to request quotes online to compare
interest rates and fees.
You can also sometimes negotiate a lower interest rate or closing cost with
your original mortgage company. It helps if you can tell them that you have
found a better offer with another lender. But sometimes other lenders will have
the better deal.
Different Loan Terms
A shorter loan term or a fixed rate mortgage can also save on long term
interest costs. By picking a 15 year term loan, you can nearly cut your interest
costs in half. You can also protect yourself from rising interest rates with an
adjustable rate mortgage by converting to a fixed rate mortgage.